Fitch Ratings affirms NDB’s National Long-Term Credit Rating at A+; Outlook Stable

Fitch Ratings has affirmed NDB’s National Long-Term Rating at A+, with the Outlook as Stable, in its annual rating action on National Development Bank PLC for 2021.

This comes on the backdrop of a successfully concluded rights issue and a private placement by the bank, which netted Rs.9.5 billion in Tier I equity capital and consistent growth the bank has achieved over the past years in line with its business strategy, unabated by the macro challenges. The rating affirmation comes at a time where the operating environment is stressed with the effects of the COVID-19 pandemic and other factors as observed by Fitch in its rating announcement and where at an industry level, asset quality is under pressure with industry-wide NPL ratios on an upward trend. At the same time, Fitch affirmed NDB’s outstanding subordinated debt at A-(lka).  Amidst the multiple challenges impacting the performance of banking institutions, NDB’s profitability is supported through improved cost efficiencies and increased focus on non-interest income, as per Fitch’s rating announcement. The bank has been driving digitisation and tech-based automations in its customer solutions as well as in internal process automations, which have led to considerable cost savings and an industry best cost-to-income ratio in the low 30 percent range. The bank’s innovative and rapid digital drive and the large uptake of same by customers together with increase in business operations have enabled enhancements in non-interest income. 

With the aforementioned capital infusion, NDB’s capital ratios have enhanced (Tier I ratio – 10.8 percent) and has placed the bank on a strong platform for envisaged strategic growth. Notwithstanding this enhancement in capital, consistent business performance and other positives sited above, a rating upgrade or a revision to the outlook to positive has not been considered at this point in time owing to the macro-economic challenges, the impact and the intensity of the pandemic, rate of economic recovery and the overall health of the banking industry. 

Guided by its five-year strategy, NDB is on a steady growth trajectory, as the only financial services group of its kind in Sri Lanka, whilst supporting customers and making valid contribution towards national economic revival amidst the 
prevailing challenges.